Brendan Williams - April 2021
Seeing the future
If you’ve ever been to Tokyo, you will understand that there are times in life when you feel as if you’re witnessing the future. Whether it’s mind-bending internet speeds guiding you through the back streets of Harajuku, having your Ramen noodles delivered by a friendly robot or ‘geeking out’ on high tech gadgets in Akihabara: it’s the future, plain and simple!
In Tokyo you expect that type of out-of-body experience; not so much in Warsaw’s off trade in the chilly spring of 2018. But that’s exactly what happened when Poland’s alcohol-free beer segment exploded into growth a few years ago: however unexpected, we got a glimpse of the future. A future we’re now seeing realized, in country after country, across the world. And if you’re in the drinks game, you can learn a lot from a country like Poland, where the alcohol-free segment has grown enormously and promises to account for 10% of the total beer category in the not-so-distant future.
Let’s take a trip back to the Polish beer category in early 2018. In Poland, the beer market is always buzzing with new product launches, primarily in the craft and crafty space. But not much was happening in the alcohol-free segment. It made up just 2% of total beer category volume and was growing relatively slowly, in the low double digits. But suddenly the dynamic changed. And the change, when it came, was at a so quick and so unusual it took many by surprise.
The first indication of serious investment in alcohol free growth was Grupa Zywiec’s (Heineken) segment merchandising concept Zero Zone (Strefa Zero). Seemingly overnight, the Polish modern trade converted to the clean white and blue point-of-sale and chiller presence. Shelf space allocated to alcohol free across off trade increased from less than 5% at the end of 2017 to somewhere close to 20% in retailers such as the French owned hypermarket E.Leclerc – which also boasted multiple chiller zones and serious amounts of off-location display. Alcohol free variants that were once lost on the shelves, merchandised next to their parent brands, now enjoyed newfound prominence as part of highly visible merchandising.
Of course, 0.0% brands were prioritized within Zero Zone which significantly benefited Heineken’s existing portfolio. Brews that were 0.0% went from making up less than half the alcohol-free segment to more than 90% by 2019. Many of Heineken’s competitors were unprepared for the sudden change, so were left playing catch up. The sudden, rapid shift in the retail landscape worked to inspire one of the fastest range expansions seen since the craft beer boom a decade earlier, as Heineken moved and everyone else fought to catch up.
More choice, higher growth
Heineken had expanded their alcohol-free portfolio with Zywiec 0.0% lager, wheat and IPA whilst simultaneously launching Heineken 0.0%. Flavoured variants make up half the alcohol-free segment in Poland so Heineken’s expansion of its Warka brand’s radler range was also well timed, especially the move into Orange-Grapefruit that directly switched consumers from Carlsberg’s once-dominant Karmi brand. This gave Heineken an impressive portfolio that accelerated segment growth by serving the major positioning territories and brew styles in the Polish market.
Asahi responded to the new reality by relaunching its Lech range into 0.0% brews and launched B-Life, it’s rebranded Czech Birrell Botancials brews in 2019. Carlsberg relaunched Okocim with 0.0% brews in 2019 along with launching Somersby 0.0% cider and increased investment behind its Karmi dark alcohol-free beer. With more choice, an increasing number of people began drinking alcohol free beers and radlers, turbo-changing segment growth along the way.
Investing for the future
It wasn’t just portfolio expansion and a new approach to merchandising that drive growth. Massive increases in media investment with cut-through creative executions drove an immediate curiosity in alcohol-free beers. By mid-2019, above-the-line media investment in alcohol free beer had increased by well over +50% compared to an already inflated 2018 spend. The leading brewers were shifting media budgets from large power brands like Lech and Zywiec, to their alcohol-free variants. It was an indication of things to come. In their 2019 annual report Heineken pledged to spend an unprecedented 25% of the total global Heineken budget on their 0.0% variant. This reflects a real commitment from the leading global brewers to grow the low and no alcohol segment towards 20% of the total beer category. This is Asahi’s stated objective.
In addition to increased media spend, sampling campaigns and urban brand experiences offering fun taste tests and chill-out zones were a feature of 2019. The brewers were quickly learning that great tastes drive high levels of conversion to purchase. ‘Brand-in-hand’ became equally important to building awareness. It also became clear that when consumers know they don’t have to compromise on the taste of alcohol-free beer, they’ll choose to drink it more often, in more occasions throughout the day.
What can we learn from looking back at Poland’s success?
Investment pays off. The alcohol-free segment shifted from being highly fragmented to being clearly defined and differentiated on shelf with outstanding point of sale material. This significantly improved both availability and visibility so conversion to purchase and trial rates exploded. Building chilled off location displays also helped drive immediate consumption, single serve trial, and link to mealtime occasions.
There is unmet consumer demand for alcohol free beer. Portfolio expansion in high potential brew styles and flavours, often as line extensions of well-established power brands, accelerated trial and household penetration.
Awareness drives growth. Above-the-line media investment built high levels of awareness and supported the transformation of the retail experience. Expect the global brewers to switch more spend from local power brands into their alcohol-free variants. Media investment will build the size of the alcohol-free segment and benefit all players.
Sampling works to change perceptions of alcohol free beers – but only if the brews are good. Investing in sampling proved critical to address perceptions of poor taste. With advances in brewing and flavour technology and an increased focus on taste, this is now an addressable barrier. Brands need to sustain investment in sampling and trial driving activity. As the low and no alcohol segment continues to grow ever faster, in an increasing number of countries, it becomes clear that there are consistent stages of growth. Brands and portfolios will differ by country, but the winners will be those brewers and drinks businesses that have focused their attention on the priority consumers, regions, sub-channels and customers. It will be those businesses that relentlessly invest in availability, visibility, and trial over time. This is simple, sometimes hard to achieve but always effective! These elements have been true for drinks businesses in leading alcohol-free countries like Spain, Sweden and now Poland. And so, whilst Warsaw may not have been high-tech Tokyo, it was certainly an interesting glimpse into the future of alcohol-free beer!